2 quarter 2009 financial results€¦ · conference call presentation 2nd quarter 2009 financial...
TRANSCRIPT
Conference Call Presentation
2nd Quarter 2009
Financial Results
September 8 th, 2009
2
Forward-looking statements are based on the beliefs and assumptions of
Arauco’s management and on information currently available to the Company. They involve risks, uncertainties and assumptions because they relate to future
events and therefore depend on circumstances that may or may not occur in
the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future
results of Arauco and could cause results to differ materially from those
expressed in such forward-looking statements.
This presentation contains certain performance measures that do not represent
IFRS definitions, as “EBITDA” and “Net financial debt”. These measures cannot be compared with the same previously used by Arauco and the same used by
other companies.
Disclaimer
3
• Financial Review 2 nd Quarter 2009 4
• Review by Business Segment 11
• Outlook 17
Agenda
4
• Revenues of US$ 733 million(+11% over 1Q 2009)
• EBITDA of US$ 150 million (+16% over 1Q 2009)
• Net Income of US$ 46 million (+241% over 1Q 2009)
• Net Financial Debt of US$ 2,561 million(+2% over 1Q 2009)
• CAPEX of US$ 96 million (-1% over 1Q 2009)
Financial Review > 2Q 2009 Highlights
5
Financial Review > Consolidated Financial Statement s
In U.S.$ million 1Q09 2Q09 Q o Q In U.S.$ million 1Q09 2Q09 Q o QSales 660 733 11% Operating activities 75 175 133%Gross Margin 178 207 16% Investing activities -95 -97 2%EBITDA 130 150 16% Financing activities 215 -141 -166%EBIT 21 62 191% Cash flow of the period 194 -64 -133%Net Income 14 46 241%
In U.S.$ million 1Q09 2Q09 Q o Q In U.S.$ million 1Q09 2Q09 Q o QCash 363 317 -13% Short term financial debt 446 427 -4%Inventories 691 658 -5% Current Liabilities 899 791 -12%Total Current Assets 2,208 2,078 -6% Long Term financial debt 2,423 2,450 1%PP&E 4,635 4,696 1% Non Current Liabilities 3,588 3,655 2%Biological Assets 3,652 3,741 2% Minority Interest 119 120 1%Total Fixed Assets 8,276 8,500 3% Controller's S.E. 5,878 6,013 2%Total Assets 10,484 10,578 1% Liabilities and S.E. 10,484 10,578 1%
Income Statement Cash Flow
Assets Liabilities and S.E.
6
Comments
• Sales: increase in prices (pulp 1.8%, sawn timber 1.3%, partially offset by panels -9.4%) and sales volume (pulp 10.0%, panels 16.1%, sawn timber 17.4%)
• Cost of Sales: total sales volume increased 11.6% QoQ
• Cost per ton of pulp is 8% lower than that of first half of 2008, strongly influenced by a decrease in unit costs of energy and fuels (-43%) and chemicals (-10%)
• LTM EBITDA reached US$743 million, a 2% decrease when compared to US$ 762 million for LTM in March 2009
Arauco - Income Statement
Financial Review > Income Statement
In U.S.$ million 1Q09 2Q09 Q o QSales 660 733 11%Cost of sales -482 -526 9%Gross Margin 178 207 16%
Selling and administrative expenses -139 -157 13%Operating Income 39 50 27%
Depreciation 44 51 14%Stumpage 46 50 8%EBITDA 130 150 16%
Other operating Income 46 55 20%Interest Expenses -42 -42 1%Foreign exchange gains (losses) -10 10 -204%Other non operating income -14 -11 -20%
Income before taxes 21 62 191%Taxes -7 -13 76%Net Income before Minority Interest 14 49 249%Minority Interest 1 3 452%Net Income 14 46 241%
7
Financial Review > Cash Flow
Arauco - Cash Flow Statement Comments
� In May ARAUCO paid U.S.$88 million in dividends
In U.S.$ million 1Q09 2Q09 Q o Q
Collection of accounts receivables 769.9 866.0 12%Payments of suppliers and personnel (less) (682.6) (731.9) 7%Other expenses paid (less) 50.2 53.7 7%Dividends and other distributions received 0.0 12.0Interest paid (less) (42.5) (20.1) -53%Income tax paid (20.2) (5.1) -75%
Net cash provided by (used in) operating ativities 74.8 174.5 133%
Capital Expenditures (96.7) (95.6) -1%Other investment cash flow 1.4 (1.9) -234%
Net cash provided by (used in) investing activities (95.3) (97.4) 2%
Debt issuance 450.9 227.3 -50%Debt repayment (236.0) (270.1) 14%Other financing cash flow 0.0 (98.3)
Net cash provided by (used in) financing activities 214.9 (141.1) -166%
Total positive (negative) cash flow of the period 194.3 (64.0) -133%
Effect of inflation on cash and cash equivalents 1.3 17.9 1323%Cash and cash equivalents at beginning of the period 167.3 362.9 117%
Cash and cash equivalents at end of the period 362.9 316.7 -13%
8
Comments
� Under IFRS Arauco consolidates debt of U.S.$ 154.3 million coming from Forestal Rio Grande
� In May the SVS approved the filing of a new line of local bonds for UF 20 million (approx. US$ 760 million)
Financial Review > Debt
Arauco - Consolidated Debt Position
Financial Debt Amortization (in U.S.$ million)
In U.S.$ million 1Q09 2Q09 Q o QShort term financial debt 446 427 -4%Long term financial debt 2,423 2,450 1%
Total Financial debt 2,869 2,878 0%
Cash and Equivalent 363 317 -13%
Net financial debt 2,506 2,561 2%
9
Financial Review > Ratios
Key Financial Ratios
Q1/09 Q2/09 YTD 09Profitability
Gross margin 27.0% 28.2% 27.6%
Operating margin 6.0% 6.8% 6.4%
EBITDA margin 19.6% 20.5% 20.1%
ROA (EBIT / Total Assets) 1.5% 1.9% 1.7%
ROCE (EBIT (1 - tax rate) / Total Capitalization) 1.4% 1.8% 1.6%
ROE (Net Income / Equity) 0.9% 3.2% 2.1%
Leverage
Interest Coverage Ratio (EBITDA / Interest Expenses) 3.1x 3.6x 3.4x
Net Financial Debt / EBITDA 4.8x 4.3x 4.6x
Total Financial Debt / Total Capitalization 32.4% 31.9% 31.9%
Net Financial Debt / Total Capitalization 28.3% 28.4% 28.4%
Total Financial Debt / Equity 47.8% 46.9% 46.9%
Net Financial Debt / Equity 41.8% 41.8% 41.8%
10
• Financial Review 2nd Quarter 2009 4
• Review by Business Segment 11
• Outlook 17
Agenda
11
Review by Business Segment > Pulp
402
362
2Q 09
1Q 09
2Q 08
Pulp Division Net Sales (in US$ million)
• The pulp market bottomed at the beginning of second quarter 2009. During the following months the pulp market has experienced an important increase in prices and volume
• Most of this recovery has been pushed by Asian markets – in particular China –starting on April and May
• Unit costs are going down in line with cost-cut programs and helped by external prices of main raw materials, especially chemicals and wood
• Average pulp price of radiata pine to China has been increasing since end of last year:
562
Net Sales Price Volume
Q o Q 11.0% 1.8% 10.0%
Y o Y -28.5% -35.3% 11.5%
$567$503$473$470
3Q092Q091Q09Dec 2008
12
Review by Business Segment > Panels
184
175
250
2Q 09
1Q 09
2Q 08
Panels Division Net Sales (in US$ million)
• During the second quarter of 2009, our plywood sales showed a slight recovery in volume, mostly explained by an increase in our North America market share, rather than an increase in overall demand
• The European market continues with low activity, but with low stock levels of plywood, which has allowed increasing sales
• Similar to our first quarter, the global crisis along with currency devaluation of markets has forced prices downwards
• Able to maintain or increase our sales volumes of MDF and Hardboard in Latin America mainly by an increase of our market share, rather than an increase in demand
Net Sales Price Volume
Q o Q 5.1% -9.4% 16.1%
Y o Y -26.5% -29.2% 4.7%
13
Review by Business Segment > Sawn Timber
118
100
193
2Q 09
1Q 09
2Q 08
Sawn Timber Division Net Sales (in US$ million)
• Our sawn timber business has been the most impacted business segment with the global economic downturn, and in particular with the down cycle of the US housing sector
• The US Housing industry has showed a slight tendency to recover during the second quarter of 2009. Homebuilding reached levels of near 580,000 houses by June. Current construction level remain the lowest in the last 50 years
• During the second quarter of the year there was a slight rise in prices and sales volume of moldings and wood products, however, sales are still low compared with the same period of the last year
• As part of the company's plan to consolidate production towards its most efficient facilities, Arauco started in April 2009 the expansion of the Viñalessawmill from 240,000 to 380,000 cubic meters
Net Sales Price Volume
Q o Q 18.6% 1.3% 17.4%
Y o Y -38.7% -11.3% -30.0%
14
• On August 26, ARAUCO announced the acquisition of the wood-panel company TafisaBrasil S.A.
• All-cash transaction for the full ownership for the equivalent of U.S.$165.2 million
• Total assets were valued at approximately U.S.$227 million minus corresponding liabilities
• Arauco assumes a financial debt for the equivalent of U.S.$22 million
• Strengthens ARAUCO’s position in the Brazilian panels market, by doubling current market share
• On August 26, ARAUCO announced the acquisition of the wood-panel company TafisaBrasil S.A.
• All-cash transaction for the full ownership for the equivalent of U.S.$165.2 million
• Total assets were valued at approximately U.S.$227 million minus corresponding liabilities
• Arauco assumes a financial debt for the equivalent of U.S.$22 million
• Strengthens ARAUCO’s position in the Brazilian panels market, by doubling current market share
Subsequent events > ARAUCO acquires Tafisa Brasil S.A .
Source: Arauco
• Tafisa’s main asset is a production facility located in the city of Pien in the State of Paraná, Brazil
• The facility has a total installed capacity of 640,000 m3 annually, that operates three production lines:
– Two Medium Density Fiberboard lines (380,000 m3)
– One particleboard line (260,000 m3)
• The facility also includes minor value-added lines for the construction and furniture industries
• Tafisa’s main asset is a production facility located in the city of Pien in the State of Paraná, Brazil
• The facility has a total installed capacity of 640,000 m3 annually, that operates three production lines:
– Two Medium Density Fiberboard lines (380,000 m3)
– One particleboard line (260,000 m3)
• The facility also includes minor value-added lines for the construction and furniture industries
The DealThe Deal The CompanyThe Company
• Wood cost
• Overhead / administration costs
• Production efficiency and Distribution channels
• Better supplier terms and conditions
• Wood cost
• Overhead / administration costs
• Production efficiency and Distribution channels
• Better supplier terms and conditions
Potential SinergiesPotential Sinergies
15
• In its largest international transaction, on July 2 2nd ARAUCO returned to the U.S. capital market with a U.S.$ 500 million 10-yea r bond
• Strong investor support and an orderbook with more t han four times the offer
• The bond was finally priced at UST + 387.5 basis po ints, with a yield-to-maturity of 7.406%
• The use of the proceeds is for the refinancing of s hort term debt and for general corporate purposes
Subsequent events > ARAUCO issues US$500 in Yankee bonds
16
• Financial Review 2nd Quarter 2009 4
• Review by Business Segment 11
• Outlook 17
Agenda
17
• We believe global pulp market bottomed during 1Q 20 09; signs of recovery appeared during this second quarter and would conti nue for second half of 2009
– Overall, prices of pine radiata to China and Europe increased approximately US$ 30 to 40 / Adt during second quarter, and upward trend should continue in the third quarter
– Asia: China should continue with an active demand, with price increases near US$ 30 /Adt. Japan, Korea, Taiwan markets also show price improvements and active demand, which should continue during second half of 2009
– Europe: price increases in the 40/Adt range are expected, but prices are still 5% to 10% lower than in China
– South America: has a 1-2 month lag in price adjustments respect to Asia and Europe
• Unit pulp costs still have room for reduction
– Pushed by lower costs of main chemical raw material such as chlorate and caustic soda
Outlook > Pulp market
18
Comments
• Since pulp prices bottomed at beginning of the year, price has increased above $100/Adt
• There is some lag between pulp price and it’s impact over ARAUCO’sEBITDA
Outlook > Pulp market
286
159
130150
590570
540520510 490
470 470 470 480 490 500
3Q 0
8 *
Oct
08
Nov
08
4Q 0
8 *
Jan
09
Feb
09
1Q 0
9
Apr
09
May
09
2Q 0
9
Jul 0
9
Aug
09
3Q 0
9
ARAUCO EBITDA by Quarter in US$ millions
Pulp price (radiata pine) to China in US$/Adt
Source: Hawkins Wright; Arauco
* 4Q2008 EBITDA under Chilean GAAP
Pulp Price vs. EBITDA
19
• Black Liquor Tax Credit continues giving an unfair cost competitiveness to US pulp mills – Canada followed with its own subsidy
– Total subsidy for 2009 estimated around $4 to $6 billion for the industry
– We do not expect a renewal of this law for 2010
• China is leading pulp demand; in March increased import volume 38% Year-to-date
– Despite increase in prices, substitution of domestic wood pulp and non-wood pulp production with imported fiber continues
Outlook > Pulp market
Source: Bloomberg, Arauco analysisSource: Hawkins Wright, Arauco
BHKP
60
80
100
120
140
160
180
200
Jan
-06
Apr
-06
Jul-
06
Oct
-06
Jan
-07
Apr
-07
Jul-
07
Oct
-07
Jan
-08
Apr
-08
Jul-
08
Oct
-08
Jan
-09
Apr
-09In
dex
Janu
ary
2006
= 1
00
US$ EUR CAD BRL CLP
NBSK
60
80
100
120
140
160
180
200
Jan-
06
Apr
-06
Jul-0
6
Oct
-06
Jan-
07
Apr
-07
Jul-0
7
Oct
-07
Jan-
08
Apr
-08
Jul-0
8
Oct
-08
Jan-
09
Apr
-09
Inde
x Ja
nuar
y 20
06 =
100
US$ EUR CAD CLP
20
Plywood:� Europe is showing some signs of recovery in demand,
although still humble
� In USA demand has been stable, although there has been little space for price increases. ARAUCO increasing its share in the retail sector through home improvement stores
MDF:� Production in Chile and Argentina at normal levels --
both countries being able to export with price increases
Brazilian market :� Industry consolidation
� Will enter an overcapacity of both MDF and particleboard production, adding 2-3 million m3 at end of 2009 and 2010
� Prices with a downward pressure
� Appreciation of the Real is making less attractive the export market
Outlook > Panels
45%
17%13% 13% 12%
Dur
atex
+ S
atip
el
AR
AU
CO
+TA
FIS
A
Mas
isa
Fib
erpl
ac
Oth
ers
Source: Arauco estimations
Brazilian MDF+PB Market Share - 2009
21
• There is some evidence the construction of houses in the US has bottomed, and we expect both housing permits and starts to stabilize during the next months
• Asian market shows some sign of recovery
– For Korea and Taiwan, prices are expected to increase 15 $/m3
– Demand in China has been active, with almost normal levels of sales volume for the furniture industry and an increasing demand of wood for packaging. Prices are also expected to increase
Outlook > Sawn Timber markets
US Housing Starts and Permits
Starts (in ‘000 units / year)
Permits (in ‘000 units / year)
Source: U.S: Census Bureau
933
849822
763
655
556
488
574521
479
551587 581
Jul 0
8
Aug
08
Sep
08
Oct
08
Nov
08
Dec
08
Jan
09
Feb
09
Mar
09
Apr
09
May
09
Jun
09
Jul 0
9
22
Q & A
23
Arauco > Investor Relations
José Luis Rosso Financial Planning & Investor Relations [email protected]: (56-2) 461 72 21
Valentina Concha Bárbara DelsoAnalyst [email protected] [email protected]: (56-2) 461 72 83 Phone: (56-2) 461 72 93
Fax: (56-2) 461 75 41www.arauco.cl
Conference Call Presentation
2nd Quarter 2009
Financial Results
September 8 th, 2009
A replay of this conference call will be available from September 8, 2009, 12:30 to September 15, 2009 23:59 (EST)
Replay number: +1 (706) 645-9291 or (800) 642 1687 (only for participants from United States)Password: 28155952
A replay of this conference call will be available from September 8, 2009, 12:30 to September 15, 2009 23:59 (EST)
Replay number: +1 (706) 645-9291 or (800) 642 1687 (only for participants from United States)Password: 28155952
Visit www.arauco.cl for more information